Manatt Phelps Is Back on Hot Seat in Big Bucks Malicious Prosecution Suit

A divided California appeals court has revived a malicious prosecution lawsuit against Manatt Phelps & Phillips concerning a 1998 federal trademark dilution and false advertising complaint it filed against the Franklin Mint Co. on behalf of the Diana, Princess of Wales Memorial Fund.

That underlying federal case resulted in a 2000 grant of summary judgment for the Franklin Mint, as well as an award of $1.6 million in attorney fees. At the time, Judge Florence-Marie Cooper of the U.S. District Court for the Central District of California called the fund’s claims concerning the Princess Diana dolls and plates manufactured by the defendant company “groundless” and “unreasonable.” The Franklin Mint had been manufacturing Princess Diana goods since about 1981, the Metropolitan News-Enterprise recounts.

Six months later, the company filed suit for malicious prosecution in California state court. The fund settled and Manatt, which proceeded to trial, won the Los Angeles Superior Court case. However, a divided appeals court has now reinstated the case, finding the law firm liable as a matter of law and remanding the case back to the trial court for determinations concerning malice and damages.

The federal complaint, which referred to the mint and its executives as “vultures feeding on the dead” months after Princess Diana’s death, did tens of millions of dollars of damage to its reputation, the company contends.

A dissenting judge on the appellate panel said there was a more than adequate legal basis for Manatt to bring the federal case in 1998 and objected to the law firm’s being targeted for damages simply by virtue of having filed suit for a client.

The Franklin Mint was represented in the appeal by Loeb & Loeb and Akin Gump Strauss Hauer & Feld. The Manatt was represented by Horvitz & Levy and Munger Tolles & Olson.